Greece’s economy will contract by around 8.2% this year due to the effects of the coronavirus pandemic before picking up again next year, the government said on Monday when submitting its 2021 budget proposal to parliament. Budget 2021 has been “set in an environment of unprecedented uncertainty, due to the indefinite expiration date of the unprecedented coronavirus pandemic,” government spokesman Stelios Petsas said.
Greece emerged almost two years ago from eight years of international bailout programs, in which it made deep spending cuts and tax increases to qualify for bailout loans. Its financial crisis has caused unemployment to skyrocket and wiped out a quarter of the economy.
The country’s public debt is expected to reach 337 billion euros this year, or 197.4% of gross domestic product. This would drop slightly to 342 billion euros, or 184.7% of GDP, in 2021, according to the draft budget. Unemployment is expected to climb to 18.6% this year from 17.3% last year, before falling to 16.5% next year.
Petsas said the recession forecast for 2020 is less severe than the 8.7% contraction estimated for the euro area as a whole. The economy is expected to rebound 7.5% next year, so that “the incomes of the Greek people will remain virtually unchanged” over the two-year period, according to the budget.
The primary budget balance that is, the state budget without taking into account the cost of debt servicing will fall this year to a deficit of 6.2% and remain in a deficit of around 1% next year.